Ken Owens Construction specializes in small additions and repairs. His normal charge is $500/day plus materials. Due to his physical condition, David, an elderly gentleman, needs a downstairs room converted to a bathroom. Ken has produced a bid for $5,000 to complete the bathroom. He did not provide David with the details of the bid. However, they are shown here. Ken’s Bid Detail Dollars Direct Material $2,200 Direct Labor 1,700 Variable overhead 100 Fixed overhead 500 Profit 500 $5,000 A. The town’s social services has asked Ken if he could reduce his bid to $4,000. Should Ken accept the counter offer? Current Bid New Bid Direct Material $2,200 $2,200 Direct Labor 1,700 1,700 Variable overhead 100 100 Fixed overhead 500 Profit 500 $5,000 $4,000 B. How much would his income be reduced? $????

Ken Owens Construction specializes in small additions and repairs. His normal charge is $500/day plus materials. Due to his physical condition, David, an elderly gentleman, needs a downstairs room converted to a bathroom. Ken has produced a bid for $5,000 to complete the bathroom. He did not provide David with the details of the bid. However, they are shown here. Ken’s Bid Detail Dollars Direct Material $2,200 Direct Labor 1,700 Variable overhead 100 Fixed overhead 500 Profit 500 $5,000 A. The town’s social services has asked Ken if he could reduce his bid to $4,000. Should Ken accept the counter offer? Current Bid New Bid Direct Material $2,200 $2,200 Direct Labor 1,700 1,700 Variable overhead 100 100 Fixed overhead 500 Profit 500 $5,000 $4,000 B. How much would his income be reduced? $????

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter10: Short-term Decision Making

Section: Chapter Questions

Problem 4PA: Ken Owens Construction specializes in small additions and repairs. His normal charge is $400/day...

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Ken Owens Construction specializes in small additions and repairs. His normal charge is $500/day plus materials. Due to his physical condition, David, an elderly gentleman, needs a downstairs room converted to a bathroom. Ken has produced a bid for $5,000 to complete the bathroom. He did not provide David with the details of the bid. However, they are shown here. Ken’s Bid Detail DollarsDirect Material $2,100Direct Labor 1,600Variable overhead 200Fixed overhead 600Profit 500$5,000 A. The town’s social services has asked Ken if he could reduce his bid to $3,900. Should Ken accept the counter offer? Current Bid New BidDirect Material $2,100 $2,100 Direct Labor 1,600 1,600 Variable overhead 200 200 Fixed overhead 600 Profit 500 $5,000 $3,900 _________ B. How much would his income be reduced? $___________ C. If the town’s social services guaranteed him another job next month at his normal price, could he accept this job at $3,900? _________
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